SOURCE: California Water Service Group

California Water Service Group

July 30, 2014 17:05 ET

California Water Service Group Announces Second Quarter 2014 Results

SAN JOSE, CA--(Marketwired - Jul 30, 2014) - California Water Service Group (NYSE: CWT) today announced net income of $17.2 million or $0.36 per diluted common share for the second quarter of 2014, compared to net income of $13.5 million or $0.28 per diluted common share for the second quarter of 2013. Included in the second quarter of 2014 operating results is a $2.5 million (or $0.05 per diluted common share) non-recurring tax benefit.

Revenue for the second quarter of 2014 was $158.4 million, compared to revenue of $154.6 million in second quarter 2013, in part due to higher estimated unbilled revenue. The unbilled revenue increase resulted from higher consumption at the end of the quarter which is not included in the water revenue adjustment mechanism (WRAM).

Total operating expenses for the second quarter of 2014 increased $1.4 million, or 1%, to $135.1 million. Increases in water production costs, primarily purchased water cost increases, were partially offset by decreases in other operating expenses, income taxes, and property and other taxes. Maintenance expense increased $0.8 million, or 19%, to $5.0 million, while depreciation expense increased $1.6 million, or 11%, to $16.1 million due to 2014 capital additions.

Other income, net of income taxes, increased $0.7 million in the second quarter of 2014, primarily due to an increase in unrealized gains on our benefit plan insurance investments. Interest expense decreased $0.4 million, or 6%, to $6.9 million due to the Company's repayment of long-term debt in 2013. 

A delay in the decision on the Company's largest subsidiary's General Rate Case, filed with the California Public Utilities Commission (CPUC) in 2012, continued to impact results for the quarter. On July 21, 2014, the CPUC issued a Proposed Decision on California Water Service Company's (Cal Water) General Rate Case. The Proposed Decision will not become effective until it has been reviewed and approved by the CPUC. The Commission may adopt the proposed decision, modify it, or reject it.

Until the Proposed Decision is adopted, Cal Water will continue to track the difference between approved interim rates and new rates that are eventually adopted in a memorandum account. After new rates are implemented, the memorandum account balance will be collected through customer surcharges over 12, 24, or 36 months. Had the Commission approved the settlement proposed by the parties effective January 1, 2014, the new rates would have increased pre-tax income $10.2 million for the six month period ended June 30, 2014. The proposed new rates would have added the following to the Company's results in 2014: $16.1 million of pre-tax income for service charges, flat rate, and fire protection rate increases, $1.6 million of pre-tax income from the proposed new health care balancing account, and a $7.5 million reduction to WRAM pre-tax income. 

"We are pleased to have a Proposed Decision in Cal Water's General Rate Case. We are looking forward to receiving a final decision that will allow us to recover prudently incurred costs of providing a safe, reliable water supply and earn a reasonable return on critical infrastructure investments," said President and Chief Executive Officer Martin A. Kropelnicki.

"Having this lengthy proceeding behind us will enable us to focus all of our attention on meeting our customers' need for a reliable supply of high quality water in the midst of one of the most serious droughts in the state's history," he said.

All stockholders and interested investors are invited to listen to the teleconference. The 2014 second quarter conference call may be accessed by dialing 1-888-572-7033 or 1-719-325-2491 and keying in ID# 3765528. A replay of the call will be available from 2:00 p.m. ET on Thursday, July 31, 2014 through September 30, 2014, at 1-888-203-1112 or 1-719-457-0820, ID# 3765528. The call, which will be hosted by President and Chief Executive Officer Martin A. Kropelnicki and Vice President and Chief Financial Officer Thomas F. Smegal, will also be webcast under the investor relations tab at www.calwatergroup.com.

California Water Service Group is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, Inc., CWS Utility Services, and HWS Utility Services. Together these companies provide regulated and non-regulated water service to approximately 2 million people in more than 100 California, Washington, New Mexico, and Hawaii communities. Group's common stock trades on the New York Stock Exchange under the symbol "CWT." Additional information is available at our web site at www.calwatergroup.com.

This news release contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" treatment established by the Act. Forward-looking statements are based on currently available information, expectations, estimates, assumptions and projections, and management's judgment about the Company, the water utility industry and general economic conditions. Such words as would, expects, intends, plans, believes, estimates, assumes, anticipates, projects, predicts, forecasts or variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are subject to uncertainty and changes in circumstances. Actual results may vary materially from what is contained in a forward-looking statement. Factors that may cause a result different than expected or anticipated include, but are not limited to: governmental and regulatory commissions' decisions; changes in regulatory commissions' policies and procedures; the timeliness of regulatory commissions' actions concerning rate relief; changes in the capital markets and access to sufficient capital on satisfactory terms; new legislation; changes in California Department of Public Health water quality standards; changes in environmental compliance and water quality requirements; changes in accounting valuations and estimates; changes in accounting treatment for regulated companies, including adoption of International Financial Reporting Standards, if required; electric power interruptions; increases in suppliers' prices and the availability of supplies including water and power; fluctuations in interest rates; litigation that may result in damages or costs not recoverable from third parties; acquisitions and our ability to successfully integrate acquired companies; the ability to successfully implement business plans; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type; the involvement of the United States in war or other hostilities; our ability to attract and retain qualified employees; labor relations matters as we negotiate with the unions; federal health care law changes that could result in increases to Company health care costs and additional income tax expenses in future years; changes in federal and state income tax regulations and treatment of such by regulatory commissions; implementation of new information technology systems; changes in operations that result in an impairment to acquisition goodwill; restrictive covenants in or changes to the credit ratings on current or future debt that could increase financing costs or affect the ability to borrow, make payments on debt, or pay dividends; general economic conditions, including changes in customer growth patterns and our ability to collect billed revenue from customers; changes in customer water use patterns and the effects of conservation; the impact of weather and climate on water availability, water sales and operating results; the ability to satisfy requirements related to the Sarbanes-Oxley and Dodd-Frank Acts and other regulations on internal controls; and, other risks and unforeseen events. When considering forward-looking statements, you should keep in mind the cautionary statements included in this paragraph, as well as the annual 10-K, Quarterly 10-Q, and other reports filed from time-to-time with the Securities and Exchange Commission (SEC). The Company assumes no obligation to provide public updates of forward-looking statements.

   
   
CALIFORNIA WATER SERVICE GROUP  
CONDENSED CONSOLIDATED BALANCE SHEETS  
Unaudited  
   
(In thousands, except per share data)   June 30,     December 31,  
    2014     2013  
ASSETS                
Utility plant:                
  Utility plant   $ 2,269,779     $ 2,213,328  
  Less accumulated depreciation and amortization     (730,266 )     (697,497 )
    Net utility plant     1,539,513       1,515,831  
                 
Current assets:                
  Cash and cash equivalents     29,706       27,506  
  Receivables:                
    Customers     34,278       31,468  
    Regulatory balancing accounts     26,978       30,887  
    Other     13,825       18,700  
  Unbilled revenue     28,055       17,034  
  Materials and supplies at weighted average cost     5,952       5,571  
  Taxes, prepaid expenses and other assets     12,014       8,324  
    Total current assets     150,808       139,490  
                 
Other assets:                
  Regulatory assets     264,245       251,681  
  Goodwill     2,615       2,615  
  Other assets     53,003       50,238  
    Total other assets     319,863       304,534  
    $ 2,010,184     $ 1,959,855  
                 
CAPITALIZATION AND LIABILITIES                
Capitalization:                
  Common stock, $.01 par value   $ 478     $ 477  
  Additional paid-in capital     329,332       328,364  
  Retained earnings     266,082       269,915  
    Total common stockholders' equity     595,892       598,756  
  Long-term debt, less current maturities     423,334       426,142  
    Total capitalization     1,019,226       1,024,898  
                 
Current liabilities:                
  Current maturities of long-term debt     6,550       7,908  
  Short-term borrowings     81,215       46,815  
  Accounts payable     70,906       55,087  
  Regulatory balancing accounts     6,603       1,827  
  Accrued interest     4,240       4,245  
  Accrued expenses and other liabilities     52,560       50,702  
    Total current liabilities     222,074       166,584  
                 
Unamortized investment tax credits     2,106       2,106  
Deferred income taxes, net     180,956       183,245  
Pension and postretirement benefits other than pensions     145,426       145,451  
Regulatory and other liabilities     90,134       86,455  
Advances for construction     181,443       183,393  
Contributions in aid of construction     168,819       167,723  
    $ 2,010,184     $ 1,959,855  
                 
   
   
CALIFORNIA WATER SERVICE GROUP  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
Unaudited  
(In thousands, except per share data)  
             
For the Three-Months ended:            
    June 30,     June 30,  
    2014     2013  
                 
Operating revenue   $ 158,416     $ 154,555  
Operating expenses:                
  Operations:                
    Water production costs     61,915       59,645  
    Administrative and general     23,796       23,155  
    Other operations     16,004       17,030  
  Maintenance     4,988       4,188  
  Depreciation and amortization     16,087       14,491  
  Income taxes     7,190       9,548  
  Property and other taxes     5,144       5,715  
    Total operating expenses     135,124       133,772  
                   
    Net operating income     23,292       20,783  
                 
Other income and expenses:                
  Non-regulated revenue     3,474       3,215  
  Non-regulated expenses, net     (2,253 )     (3,240 )
  Income tax (expense) benefit on other income and expense     (481 )     16  
    Net other income (loss)     740       (9 )
                 
Interest expense:                
  Interest expense     7,077       7,803  
  Less: capitalized interest     (215 )     (539 )
    Net interest expense     6,862       7,264  
                 
Net income   $ 17,170     $ 13,510  
                 
Earnings per share                
  Basic   $ 0.36     $ 0.28  
  Diluted   $ 0.36     $ 0.28  
Weighted average shares outstanding                
  Basic     47,804       47,729  
  Diluted     47,837       47,760  
Dividends declared per share of common stock   $ 0.1625     $ 0.1600  
                 
   
   
CALIFORNIA WATER SERVICE GROUP  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
Unaudited  
(In thousands, except per share data)  
   
For the Six-Months ended:            
    June 30,     June 30,  
    2014     2013  
                 
Operating revenue   $ 268,931     $ 265,999  
Operating expenses:                
  Operations:                
    Water production costs     107,317       101,342  
    Administrative and general     48,937       48,436  
    Other operations     32,380       32,675  
  Maintenance     9,993       8,321  
  Depreciation and amortization     32,140       29,120  
  Income taxes     3,351       8,402  
  Property and other taxes     10,369       11,150  
    Total operating expenses     244,487       239,446  
                   
    Net operating income     24,444       26,553  
                 
Other income and expenses:                
  Non-regulated revenue     7,754       6,737  
  Non-regulated expenses, net     (6,372 )     (5,657 )
  Income tax (expense) on other income and expense     (560 )     (435 )
    Net other income     822       645  
                 
Interest expense:                
  Interest expense     14,152       15,840  
  Less: capitalized interest     (580 )     (1,079 )
    Net interest expense     13,572       14,761  
                 
Net income   $ 11,694     $ 12,437  
                 
Earnings per share                
  Basic   $ 0.24     $ 0.28  
  Diluted   $ 0.24     $ 0.28  
Weighted average shares outstanding                
  Basic     47,780       45,004  
  Diluted     47,818       45,034  
Dividends declared per share of common stock   $ 0.3250     $ 0.3200  
                 

1720 North First Street
San Jose, CA 95112-4598

Contact Information

  • Contact:
    Tom Smegal
    (408) 367-8200 (analysts)

    Shannon Dean
    (310) 257-1435 (media)